Accurate forecasting versus reality in the sales forecasting process
In our latest study, titled "The gap between forecasts and reality", we analyzed 270,912 closed purchase opportunities representing a turnover of $ 18.1 billion in finalized sales. from 18 companies. It was a revealing exercise of sales forecast statistics. The results showed that there was a huge gap between sales managers' forecasts and what would happen at the end of the quarter.
We knew that in 2016, CSO Insights data showed that only 45.8% of planned transactions were closed as planned. It's less accurate than throwing a coin. But our numbers have shown that the disconnect is even more dramatic. There is a huge gap between what sellers "think" to do and what they actually do.
Precise sales forecasts? | Only 28.1% of forecasts are close to accuracy
Shockingly, only 28.1% of analyzed opportunities were closed in the 5% of 90-day forecasts. This is very different from the 2016 CSO Insights, which can be explained by the source of the relevant data. Specifically, CSO Insights collected data through surveys, while InsideSales.com used software to track specific dollar amounts.
Looking deeper, we found that 47% of 90-day forecasts were skewed by more than half!
On the whole of our data, the average forecast over 90 days for closed opportunities gained was exceeded by just over 31%.
Sales representatives overestimate almost twice as much as they do not underestimate
If you feel that your sales pipeline is inflated, you are probably right. Sales representatives are notoriously optimistic, and the truth is that you must be able to work in this business. However, weak vendor forecasting skills often result in transactions that will never remain unresolved.
The data shows that when representatives' forecasts were false, they were overestimated by an average of $ 91,000 and underestimated by only $ 47,000.
As the average size of all forecasts in our sample was just under $ 81,000. This means that reps are more likely to be too optimistic about big deals.
Our analysis also showed that the greater the agreement, the more likely you are to overestimate the outcome.
Increase the accuracy of sales forecasts with AI
The sales forecast does not have to be like looking into a crystal ball. Technology has made significant progress and can contribute to revenue forecasts. We now have the tools to improve human judgment with predictive information for more accurate results.
Artificial Intelligence (AI) can analyze interactions and past sales results to understand the key features of good and bad offers, allowing you to clean the pipeline. AI sales technology can improve the accuracy of forecasts up to 30%. An IA optimized sales forecasting software is created for this specific task.
This can also help improve the performance of the sales team by highlighting the sales activities that actually lead to the closure of the company. Once you have identified what constitutes a good deal and an excellent sales representative, managers can easily help representatives succeed. A simple improvement in daily activities of only 20% of the sales team can generate millions of dollars in revenue.
The ability of executives to accurately project quarterly revenues is critical to the company's growth plans. The problem is that even when sales managers correctly call the transactions that are concluded, the size of each opportunity varies so much that it is virtually impossible to establish accurate sales forecasts.
A pipeline and sales forecasting tool that uses AI to help you close more appropriate deals and accurately forecast revenue can provide businesses with the confidence they need for their financial projections .
What do you think of our research in anticipation of sales? Share your thoughts or questions in the comments section below.
Next Step: InsideSales.com Launches New Generation AI Sales Platform
Editor's Note: This position was published on July 30, 2018 and has been updated to improve its quality and relevance.